Taiwan’s fair trade authority, Qualcomm settle dispute (update)

Taipei, Taiwan's Fair Trade Commission (FTC) has reached a settlement with smartphone chip designer Qualcomm Inc. on an antitrust dispute that prompted the regulator to slap a NT$23.4 billion (US$763 million) fine on the American company last year.

The settlement was achieved at an Intellectual Property Court collegiate bench, the FTC announced at a press briefing Friday.

It marks the first time since the FTC was founded as a Cabinet organ in 1991 that it has settled a legal dispute with a targeted company. The fine is also the biggest the FTC has levied on a single company in its history.

Under the settlement, Qualcomm has agreed to drop its claim concerning a NT$2.73 billion fine it has already paid, while the FTC has accepted the company's commitments, including one to undertake fair negotiations on licensing with local mobile phone makers and chip suppliers.

The commission also accepts that Qualcomm will launch a five-year industrial investment project in Taiwan, which will cover 5G collaboration, new market expansion, start-up and university collaborations and the founding of an operational and manufacturing engineering center in Taiwan, according to a statement published on the FTC website.

FTC member Hung Tsai-lung (???) said at the press briefing that the agency decided to "replace penalty with conciliation" in the best interests of the country's industrial sector, after engaging in five rounds of talks with Qualcomm and in view of the possibility that time-consuming lawsuits would jeopardize Taiwan's 5G development.

In addition to the foregoing commitments, he said, Qualcomm has also promised to provide fair, reasonable and discrimination-free patent authorization terms for Taiwanese chip suppliers and has promised not to sign exclusive royalty discount deals with buyers in exchange for them using Qualcomm mobile data chips.

Qualcomm has also agreed to report to the FTC every six months over the next five years about how it is fulfilling its commitments, Hung said.

On the matter of Qualcomm's five-year industrial investment and collaboration commitment, the total value will exceed US$700 million, higher than the fine that was levied against the company before the settlement, Hung said.

Asked what action the FTC would take if Qualcomm reneges on its commitments, Hung said the FTC would file for commercial arbitration.

However, Qualcomm was "very sincere" in making the commitments, which match Taiwan's industrial needs, he said.

On Oct. 11, 2017, the fair trade regulator imposed a fine of NT$23.4 billion on Qualcomm after a two-year investigation into allegations of antitrust violations relating to the company's patents on mobile phone standards.

In its ruling, the FTC said Qualcomm had monopoly market status over key mobile phone standards and was violating local laws by not providing products to clients who did not agree with its conditions.

Besides the fine, which was later approved to be paid in installments, the commission told Qualcomm at the time to remove previously signed deals that forced competitors to provide price, customer names, shipments, model names and other sensitive information.

Qualcomm then appealed to the Intellectual Property Court, seeking a halt to the penalty's implementation while filing administrative litigation.

On Friday, Qualcomm also announced the judicial settlement, thanks to which, it said in a statement, its litigation filed in the Taiwan court has been closed.

"As part of the resolution, Qualcomm has agreed to certain process-related commitments confirming principles of mutual good-faith and fairness in the negotiation of agreements with handset licensees to Qualcomm's cellular standard essential patents (SEPs)," the statement said.

Qualcomm said the settlement does not require component-level licensing or set specific financial terms. Instead "it is focused on commitments that ensure good-faith negotiations for the benefit of licensees and SEP owners."

"In addition, Qualcomm will drive certain commercial initiatives in Taiwan over the next five years for the benefit of the mobile and semiconductor ecosystem, SMEs and consumers, including 5G collaborations, new market expansion, start-up and university collaborations and the development of a Taiwanese center for operations and manufacturing engineering," the company said.

Alex Rogers, executive vice president and president of Qualcomm Technology Licensing, said the company is pleased to have reached a mutually beneficial resolution with Taiwan's FTC.